Merely by admission of appeal against ITAT order, Revenue can not get over it. Supreme Court upholds High Court’s order

Merely by admission of appeal against ITAT order, Revenue can not get over it. Supreme Court upholds High Court’s order and dismisses SLP of the Department    

ABCAUS Case Law Citation:
ABCAUS 2436 (2018) 07 SC

The assessee was a charitable trust registered u/s 12A of the Income Tax Act, 1961 (the Act). During  the  course  of  assessment proceedings, the Assessing Officer noted that the  registration of the trust had been cancelled by the  commissioner of Income Tax. Since the registration had been cancelled, the Assessing Officer was of the opinion that the assessee could not cannot take assistance of exemption. Accordingly, the assessment was finalized by him treating the assessee as an Association of Persons (AoP).

Aggrieved by the cancellation of registration by the Commissioner, the assessee approached the Income Tax Appellate Tribunal (ITAT) which cancelled the order of the Commissioner of Income Tax and restored the registration  of  the  assessee  as  a  charitable trust.

In view of the Tribunal’s judgment, the Commissioner of Income Tax  (Appeals) set aside the order of the Assessing Officer. The Revenue challenged the order of the CIT(A) which was dismissed by the Tribunal.

Aggrieved by the order of the Tribunal upholding the order of the CIT(A), the Revenue approached the High Court. The foremost Question of Law framed by the Revenue was as under:

Whether on the facts and in the circumstances of the case and in law,  the Hon’ble Income Tax Appellate Tribunal was justified in relying on its decision for restoring of registration u/s 12A without appreciating that department has filed an appeal before Hon’ble High Court in respect of the said decision?

The Hon’ble High Court opined that merely because the Revenue had challenged the order passed by the Tribunal restoring  assessee’s registration under Section 12A of the Act and that appeal was admitted and pending did not mean that the Court must, as of right or  course, entertain the Appeal.

It was observed that the only argument was that if the Revenue succeeds in the Appeal challenging the order of the Tribunal restoring assessee’s registration, then it may be open for the Revenue to tax  its  income  and  by  holding  that both Sections 11 and 12 of the Act had no application thereto. The High Court opined that such ifs  and  buts  would not permit  the  Revenue to get over a presently binding order of the Tribunal.

The High Court held that the impugned order had not been quashed and set aside by the High Court. The Appeal was merely admitted. Therefore, the question proposed was not a  substantial  question of law.

The High Court opined that there is a difference and vast as it is, between an  order  being  subjected  to challenge  and  the challenge having  succeeded. In the later case, the order is  wiped out because  then  it  is  quashed  and  set  aside. Today, a challenge is merely pending.  That cannot be equated to the challenge succeeding. That hurdle was yet to be crossed. If that is not  crossed, the initial order of restoration of registration continues to bind  the Revenue.

Accordingly, the High Court had dismissed the appeal.

Aggrieved by the dismissal of the appeal by the High Court, the Revenue filed a Special Leave Petition (SLP) before the Hon’ble Supreme Court.

However the Division Bench of the Hon’ble Supreme Court disposed off the Revenue’s SLP and opined that if the appeal is decided in favour of the Department and the registration is cancelled, it would be open to the petitioner to take further steps in this matter in accordance with law.

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